China's government, increasingly worried about soaring inflation, plans to continue tightening its money supply and will probably raise interest rates again within the month.
Much of China's inflation is being fueled by the extraordinary growth in its money supply, broadly measured as so-called M2, which has soared a total of nearly 53 percent in the last two years. That is largely a result of the country's aggressive monetary and fiscal stimulus program in 2009 and early 2010, as Beijing essentially printed money in response to the global financial crisis.Although China's economy is a little less than half that of the United States, its money supply is now one-quarter larger than America's.
... the real effective exchange rate measure shows that the renminbi is strengthening by 10 percent or more a year against the dollar.
For more, see China Is Poised to Raise Rates Again, Bankers Say by , February 1, 2011 at NYTimes.com.
1 comment:
Given the massive monetary expansion in China, I will not be surprised by more tightening. In fact, I went so far to suggest that China needs to engineer a recession in order to control inflation. Of course, they will not like to do that.
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